Shares in Lundin Petroleum, Equinor rise after North Sea deal

OSLO (Reuters) - Shares in Lundin Petroleum and Equinor rose on Monday after the Norwegian major cut its stake in the Swedish firm in exchange for a higher stake in a major oilfield, the latest example of a transaction focusing on North Sea assets.

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Shares in Lundin Petroleum were up 3.4% at 0828 GMT, while Equinor’s were up 1.5%, outperforming a European oil and gas index up 0.35%.

“A landmark deal,” said Sparebank 1 Markets in a note to clients, noting it enabled Equinor to secure the gains of its acquisition of a stake in Lundin in 2016 and was the first transaction enabling a valuation of the Sverdrup field.

It is also the latest deal focusing on North Sea oil assets, after DNO’s acquisition of Faroe Petroleum in January and Chrysaor’s acquisition of ConocoPhillips’ British oil assets in April, among others.

Under the deal, Equinor would sell a 16% stake in Lundin Petroleum for about $1.56 billion, and in return acquire an additional 2.6% stake in the Johan Sverdrup oilfield for $910 million.

Equinor would still retain a 4.9% stake in Lundin and would increase its ownership in the Sverdrup field, which it operates, to 42.6%. The other partners are Aker BP and Total.

Sverdrup, scheduled to start production in November, is the biggest oil discovery made off Norway in more than three decades and is likely to account for 25% of the Nordic country’s total petroleum output at its peak in 2022.

“The transaction is the first ever where one can directly observe the Sverdrup value,” Sparebank 1 Markets said, suggesting the field’s value could be higher than previously expected.

“The value corresponds to $35 billion for the entire Sverdrup field, or $11-16 per barrel of oil equivalent (boe),” it said.

“$11/boe is based on the lower end of the resource range of 2.2 billion-3.2 billion boe and $16/boe based on the upper end of the resources range. As a comparison, we have valued Sverdrup at $11.9/boe,” it said.

Bernstein also has a new valuation of the overall field of$35 billion and $10.9-$15.9/boe on current recoverable reserve estimates.

“This is above our field model’s net present value of around $26 billion in 2019 and around $32 billion in 2020 at $60 per barrel, adding further to our bullishness on the field with potential early start up and recoverable reserve increases,” it said in a not to clients.

“Indeed, the implied multiple is ahead of the $10.3 per boe that has been paid across more average North Sea transactions confirming the quality of this field.”

Reporting by Gwladys Fouche, editing by Louise Heavens